Most certainly.
Debt funds are safer than Equity funds, and the safest Mutual fund would be a Liquid Debt Fund. Other debt funds such as Government Bond Funds, Income funds can be risky because they are extremely sensitive to changes in interest rates.
A Liquid Debt Fund is a great place to park money:
1. It provides slightly above the 6 month Bank Fixed Deposit Rate of return
2. You can invest or withdraw money at any time
3. After three years of holding taxation is very low
4. Interest is NOT taxed until you withdraw
5. Tax is charged only on the money withdrawn
6. There are certain specialized Equity Mutual Funds that give returns similar to a Liquid Fund called the Arbitrage Funds, but these are much more complex.
So a Liquid fund is quite safe, but there are no guaranteed returns in ANY mutual funds.
And then safety is a relative concept. With a Liquid fund you can be around 90% certain of positive returns above an FD rate in a year. So it is safe only for a short duration.
Over a period of ten years, the Liquid fund is very dangerous because you can lose a lot of money due to low returns. If you had put in Rs. 100 in a Liquid fund 10 years ago, you would have about Rs. 200 now. If you had put money ten years ago in some of the 'risky funds', such as diversified equity, the money would have grown to Rs. 900 by now. This is how you can lose Rs. 700 in trying to protect Rs. 100.
Debt funds are safer than Equity funds, and the safest Mutual fund would be a Liquid Debt Fund. Other debt funds such as Government Bond Funds, Income funds can be risky because they are extremely sensitive to changes in interest rates.
1. It provides slightly above the 6 month Bank Fixed Deposit Rate of return
2. You can invest or withdraw money at any time
3. After three years of holding taxation is very low
4. Interest is NOT taxed until you withdraw
5. Tax is charged only on the money withdrawn
6. There are certain specialized Equity Mutual Funds that give returns similar to a Liquid Fund called the Arbitrage Funds, but these are much more complex.
So a Liquid fund is quite safe, but there are no guaranteed returns in ANY mutual funds.
And then safety is a relative concept. With a Liquid fund you can be around 90% certain of positive returns above an FD rate in a year. So it is safe only for a short duration.
Over a period of ten years, the Liquid fund is very dangerous because you can lose a lot of money due to low returns. If you had put in Rs. 100 in a Liquid fund 10 years ago, you would have about Rs. 200 now. If you had put money ten years ago in some of the 'risky funds', such as diversified equity, the money would have grown to Rs. 900 by now. This is how you can lose Rs. 700 in trying to protect Rs. 100.
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